The plan was this: The city of Vadnais Heights lends its bonding authority to a nonprofit that builds a 200,0000-square-foot sports complex on blighted acres in the northern suburb.

Revenue from arena rentals, along with a reserve fund, were to cover bond payments and operations for the $26 million facility, city council members were told, leaving the city with a cleaned-up corner of town and residents with two hockey rinks, a domed field and a running track.

"To me, it's a win-win," then-Mayor Sue Banovetz said in 2008, when the city first started talking about a sports center.

Fast-forward to today -- 17 months after the complex opened -- and city council members are wrestling with a different reality. Accusations of mismanagement, threats of lawsuits and growing financial problems are swirling around the arena.

"Is this where I (expected) us to be right now? No. ... Are we working diligently to correct the situation? Yes," said Marc Johannsen, the city's current mayor.

Preliminary numbers included in the sports center's 2011 audit indicate revenue was about $750,000 less than expected last year, according to city documents. To fill in the gap, the city has loaned the complex about $225,000 and is expected to hand over at least an additional $400,000 in August. The city's general fund is about $5 million a year.

Bond payments go up next year, meaning the need for loans could get even bigger.

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With taxpayers' money at risk, city council members will vote by early September whether the city should continue to back the arena. Complicating the decision could be the opposing viewpoints held by two key city staff members.

"There's no way this thing could ever cash flow," said Bob Sundberg, the city's financial director.

"We need to get that reality out there," he said. "If (the city) is willing to kick in at least $600,000 to $700,000 a year to pay for it, great; otherwise walk away.

A skater enters the Vadnais Sports Center in Vadnais Heights, Tuesday, June 5, 2012. The facility has two sheets of ice and the state's second-tallest dome covering a 100,000-square-foot turf field. (Pioneer Press: Chris Polydoroff)

... It's a policy decision."

City Manager Gerald Urban sees it differently.

"I understand our revenues need to grow, and I believe they will," Urban said. "There's always a place to throw in the towel. I don't think we're there yet."

UNDERFUNDED RESERVE

To some degree, the story of how the city -- thought of by many as financially conservative -- got into this position varies depending on whom you ask.

Threats of lawsuits and fear of further harming the arena's reputation led some in the city to decline to comment on the situation. Others didn't return phone calls. Urban, an advocate for the arena from the beginning, said the city's attorney advised that only Urban and Johannsen field all questions on the facility.

The reasons for the financial shortfalls are simple, Urban said. The center failed to secure the number of contracts it anticipated and an $875,000 reserve fund to cover setbacks was never established.

Some money for the fund just never materialized, Urban said, explaining much of it was to come from the sale of outlying lots purchased next to the sports center that still haven't sold. Another $200,000 in fees the city earned through the arena deal ended up going to the city's budget instead of the reserve, Urban said.

Those kinds of factors left the reserve fund more than $650,000 off projections, and the remaining $225,000 didn't last until a rainy day.

About $130,000 was used to pay for a Zamboni ice resurfacer that the city once included in an arena naming-rights deal it later decided not to pursue, Urban said. Operational cost overruns ate up the rest.

That left nothing when shortfalls started hitting. Urban said shortfalls were expected until 2018.

FEW CONTRACTS

Contracts also have been a problem. Heavy snowfall in 2010 collapsed the center's dome, which was unusable for three weeks during prime rental time, Urban said. He noted that setback doesn't explain the full $750,000 the center was short last year.

"We had several users that just didn't use as much time as we'd projected," Urban said.

Before the city council approved the arena, the sports center's current chief operating officer, Mark Bigelbach, told council members he already had $1.8 million in signed contracts and expected another $460,000 within a week, according to minutes from the city's March 8, 2010 meeting.

But the center ended up bringing in only about $1.5 million in its first full year.

By Bigelbach's account, the city hasn't loaned the center a dime and has in fact taken sports center money to pay off its debt on its outlying lots.

"They are trying to get the sports center to pay for their extra end of this," Bigelbach said. "The model we proposed could and does pay for itself. ... But you add in the permanent dome they wanted on this, the (outlying lots) ... this has added up to something this wasn't designed for."

OWNERSHIP CONFUSION

Besides financial struggles, a 2010 audit found problems with bookkeeping at the center, largely created by confusion over who owns the building, Urban said.

For a time, Bigelbach was paying sales tax for the center from the sports center's management account, for example, when it should have been coming from the city's account.

Things came to a head at a March city council meeting when members Joe Murphy and Mark Cohen raised concerns about money Bigelbach supposedly hadn't paid back to the city. Murphy said he'd "lost confidence" in his management. Cohen said the management company wasn't "trustworthy."

The city is now considering replacing Bigelbach's management company when his contract expires in December.

"They have ... pretty much destroyed my reputation along with the sports center's," Bigelbach said, adding the arena has lost two tournaments and sponsorships because of negative publicity.

He has since filed notices to the city warning of lawsuits he intends to file should the comments he calls "outright lies" continue.

Since the audit, the city has hired an accountant to straighten up the sports center's books.

"Basically everything has been pretty much cleaned up," Joe Rigdon, the financial consultant said, adding he found no signs of misconduct or corruption at the arena.

STILL COMPETITION

Mark Erickson, a researcher for the National Sports Center in Blaine who studies hockey rinks across the state, said the arena will never be self-sustaining, particularly given the $26 million in bonds the city must pay back over the next 30 years.

"There is no facility in the state of Minnesota that could do that," Erickson said. "That's why there is usually a public subsidy with (ice-arenas), because ice-time rental doesn't cover costs."

Though a permanent domed field is rare in the state, Erickson said the feature ends up working against the sports center in the summer, because people want to play outside.

"The city is going to end up providing the annual subsidy every other city provides," he said.

About 50 percent of rinks nationwide are municipally subsidized. Of those that aren't, few make money, said Jeff Theiler, chief operating officer for the Colorado-based nonprofit Serving the American Rinks.

Though Theiler said he doesn't think Vadnais Heights' projection of $2.5 million in annual revenue is out of the question, he said competition in a state full of municipally subsidized arenas might make it so.

Bigelbach said he still believes the sports center can do it.

"We have never had a sports center like this in this area, and it's a different market than where the (National Sports Center in Blaine) is with different opportunities," Bigelbach said.

Already, the Vadnais Sports Center has garnered about $225,000 in sponsorships and hosts about 55 varsity-level games a year, plus about 20 tournaments, Bigelbach said. The center also is home to five local teams.

Even with bond payments set to jump about $450,000 next year -- and then they will level off -- Bigelbach said the center is still on track to pay for itself.

New five-year projections still under review actually show the center becoming self-sustaining before 2018, when original plans suggested, Urban said.

"It takes patience, and some on the council aren't so patient," Urban said. He added that the payoff will be felt citywide, with other area businesses benefiting from people attracted to town from the center.

"Even if the (National Sports Center) says none of these work, that doesn't mean we can't be the first," Urban said.

SEPTEMBER VOTE

How long it will get a chance to try depends on the city council. Members will vote by early September whether to support the arena for another year.

If the council decides against it, Urban said nearly $2 million set aside in bonding would go to Community Facility Partners, giving the city's nonprofit partner about three years to find a new lease-holder for the center.

The money should be enough to keep the arena open during the search, Urban added.

But the city won't be able to walk away unscathed. It potentially could lose the lots it was hoping to sell for a profit as well as the roughly $600,000 it's already paid on the properties, Urban said. The city's AA bond rating also could be affected.

Council members Gerald Auge and Cohen said they didn't want to comment on the vote. Murphy didn't return calls for comment.

Council member Lynn Kapaun said he's hoping a change in management will turn things around.

"I think their inexperience is possibly part of the problem, so I'm optimistic if we change to someone who's done this before, we will take a step up and close some of the gaps," he said.

Johannsen, the mayor, said he's waiting to see the new five-year-projections, which should be public next month.

"It's a great place, so I hope we can find a way to continue to have it without any taxpayer dollars devoted to it," Johannsen said. "Because that was the basis it was voted on in the first place.